Invacare settles shareholder lawsuit
ELYRIA, Ohio – Invacare has reached a settlement with two shareholders that claim the company’s board of directors and management team “breached their fiduciary duties” in connection with its compliance with U.S. Food and Drug Administration (FDA) regulations.
As part of the settlement, approved by the U.S. District Court for the Northern District of Ohio last week, Invacare admitted no wrongdoing but agreed to pay up to $1.3 million to the law firms representing the shareholders. It will pay “a substantial portion” of that sum from its directors and officers liability insurance.
“This has been a significant distraction to the board and management team, so we felt it was the right decision to settle it and move forward and have total focus on our quality assurance and remediation efforts,” said Lara Mahoney, director of investor relations and corporate communications.
Invacare has also agreed to pay up to $10,000 to the two shareholders—City of Lansing Police and Fire Retirement System and Colleen Witmer—and to implement a number of enhancements to corporate governance, quality control and other areas.
Those enhancements include expanding the duties of an Audit Committee to have “broad oversight responsibility and authority for Invacare’s commitment to full compliance with all FDA compliance requirements” and appointing a senior vice president of quality assurance and regulatory affairs. Invacare appointed Doug Uelmen to that position in December.
“We’ve been moving forward with changes and improvements like these all along,” Mahoney said.
A flurry of law firms announced investigations of Invacare’s board of directors following the news that the company would be working with the FDA to negotiate an agreement to address concerns with two of its facilities. The same thing happened when Linde AG announced it planned to acquire Lincare. One industry source described such law firms as “sophisticated ambulance chasers.”
“These law firms, when they get wind that a company is selling or that a company’s stock has gone down, will quickly go in and do a shakedown,” he said. “They demand that the corporation pay some extra money—only a small portion of which goes into the pockets of shareholders and the rest is a nice fee for the law firm.”
Mahoney says no other law firms to date have come forward with lawsuits. She says Invacare and the FDA are still trying to hammer out an agreement.
“Two things are happening,” she said. “On the one side, we’re having that back and forth with the FDA, and on the other side, we’re moving forward with quality assurance remediation. We still plan to have a third-party audit in the fourth quarter.”
Find more details on Invacare’s settlement here: http://www.invacare.com/cgi-bin/imhqprd/investor-relations.jsp.